Investors To Seek Political Spending Disclosure in U.S. Proxy Season

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Proxy season will kick into high gear in the U.S. from next week, and shareholders’ quest for greater corporate political spending disclosure is alive and well at Fortune 250 companies.

Most Fortune 250 companies will hold their annual general meetings between the last week of April and early June, with 42 of them happening in the last two weeks of April. Shareholders have filed a total of 52 proposals at these 42 companies, of which nine target corporate political spending or lobbying, according to a report by the Manhattan Institute’s Proxy Monitor released Wednesday. Resolutions focusing on proxy access (there are eight), including those seeking to alter the parameters of rules already implemented by companies, and on the separation of the roles of chairman and chief executive officer (seven) are the two next hottest topics at meetings this month.

Political spending refers to money going to lobbying firms, to trade associations’ lobby efforts, to non-profits involved in legislation design, as well as direct donations to political campaigns. There is no regulatory requirement to disclose such payments in the U.S. but companies are increasingly making these public in light of shareholder pressure and the risk of reputation damage.

The Center for Political Accountability, a non-profit organization that tracks disclosures of corporate political spending, said that five companies so far in 2017 have reached agreements with shareholders to withdraw resolutions on this topic. In 2016, eleven such agreements were reached, according to data on the Center’s website. In general, management seeks to negotiate with the proponents if there is a likelihood of a resolution getting significant–even it not majority–support, and proposals put forward by large institutional investors are more likely to serve as conversation starters than those advanced by individual investors.

Although the number of proposals has risen and many companies are improving transparency on their political contributions, these resolutions have only once received a majority of shareholders’ vote at the ballot, said Proxy Monitor. This was during last year’s annual general meeting of engineering and construction company Fluor, when a proposal by the City of Philadelphia Public Employees Retirement System received nearly 62% approval.

“The average shareholder support for political-spending and lobbying proposals has remained below 25%, with no noticeable uptick,” said Proxy Monitor. “The 2017 proxy votes will shed significant light on whether the Fluor vote was indeed an outlier.”

According to Proxy Monitor, Fortune 250 companies fielded 59 proposals seeking corporate political spending disclosures in 2016, compared with 54 in 2015 and a peak of 67 in 2014–the highest since 2006, when the research group began tracking shareholders’ proposals.

The New York City Comptroller, which manages five public employees’ retirement funds, has been the main driver in the campaign for proxy access in recent years, but it has also targeted corporate political spending. Last year, it filed this type of proposals with energy companies, securing agreements with four companies, while five others went to a vote. One of these included a proposal with NRG Energy, which received 49.4% of shareholders’ support, according to the NYC Comptroller’s 2016 proxy season report.

Proposals focused on environmental issues have also been garnering greater support in recent years, and it will be “interesting” to watch if that trend continues, said Proxy Monitor, “especially in light of a new administration in Washington that places significantly less regulatory emphasis on climate change than its predecessor.”

If shareholders decide to push for greater environmental accountability through proxy resolutions in the absence of regulations, that may not be noticeable until the 2018 season, however, as the regulatory landscape is still in flux.

On the other hand, less regulation may lead to diminished support for climate risk-related proposals, “assuming that institutional investors are voting as fiduciaries focused on share value: regulatory risks involving climate change, which are the principal rationale connecting the issue to shareholders’ interests, are significantly lower today than they were in 2016,” said the report.

Write to Mara Lemos Stein at mara.lemos-stein@wsj.com. Follow her on Twitter at @LikelyMara.